MtoM #167: General Surgeon Becomes a Millionaire 3 Years Out of Training and Finance 101: Cars

This is the White Coat Investor Podcast, Milestones to Millionaire Celebrating stories of success along the journey to financial freedom. This is Milestones to Millionaire podcast number 167, General Surgeon Becomes a Millionaire Less Than Three Years out of Training. I estimate that 80% of doctors need, want and should use a financial advisor and or an investment manager. Some investment gurus, such as Dr. William Bernstein, think my estimate is way too low. At any rate, if you want to use an advisor temporarily or for your entire life, there's no reason to feel guilty about it. Just make sure you are getting good advice at a fair price. If you need help updating your financial plan or just getting one in place, check out our list of recommended financial advisors@whitecoatinvestor.com financial advisors. You can do this and the White Coat Investor can help. All right. For those who aren't aware, we have a partnership with New Retirement and From now through April 30, we've got a special deal. For those who are interested in that now, they have a free version for this really powerful retirement planning software. So you can still do that, but the deal is for the next step up, their planner plus, which is $96 per year for the whole year until April 30th. So that goes up to 120 bucks starting on May 1st. But until then, we'll be at the discounted price. You can get that@whitecoatinvestor.com NewRetirement all right, we've got a great guest today for the Milestones podcast and he's just done fantastically well. Tons of their income has gone toward building wealth the last three years and they're really doing fantastic and clearly have what I call the X factor and are going to continue to build wealth rapidly. We're going to talk afterwards, so stick around. We're going to talk about cars, something that I don't talk about nearly as often as I feel like talking about it. It's one of my soapboxes. I like to get on and rant for a while because I'm not a car guy. Chris, it turns out, is a car guy. So we're going to hear more about his perspective on cars, but stick around afterward and you'll get to hear more about mine. Our guest today on the Milestones to Millionaire podcast is Chris. Chris, welcome to the podcast.

Thanks for having me. It's a pleasure to be here.

Tell the audience what you do for a living and how far you are out of training.

I am a general surgeon and I'll be three Years out of training in about three more months.

Less than three years out of training. That's going to make this milestone all the more impressive. Tell the audience what milestone we're celebrating today.

The big milestone is my wife and I just achieved a net worth of $1 million. We also have paid off our student loans.

Wow. Millionaires less than three years out of residency. That's more than twice as fast as Katie and I were able to do it. That's pretty awesome. You should be very proud of yourself. Thank you. All right, well, let's break down the numbers. What's been your average income, average household income over the last three years?

Between the two of us, we're right at 500,000. So my salary is 440 and hers is about $60,000 as a teacher.

Well, what that suggests to me is that you probably put about two thirds of your income toward building wealth over the last three years, which is a heck of a percentage. Once you pay the income or the income taxes on $500,000 worth of income, what was your net worth coming out of training?

We were negative. So coming out of residency, we had about $270,000 of student loans. Between the two of us, I was able to pay those off very quickly. I had a substantial signing bonus with my job. I put basically $180,000 of signing bonus towards student loans day one. And then that left 90,000 left, which we paid off in about seven months. And then we just focused all of our energy on kind of future retirement after the student loans were dealt with. And then I will say we did have a little bit of an unexpected inheritance of about $200,000 over the last year, which kind of put us ahead of schedule as well.

Yeah. What does your wife do for a living?

She's a teacher.

Okay. So a teacher and a surgeon making $500,000. You started almost $300,000 in the hole when you came out of training. Correct. So really, your net worth swing is like 1.3 million?

Yes.

You made about 1.5. You got a couple hundred thousand dollars in inheritance. You got. It sounds like you got 180 in addition to that 500 as a signing bonus. Or you count that?

Yeah, we got $180,000, a signing bonus initially, but that went. That went all towards student loans immediately. And then we also got $200,000 in inheritance this year.

Did you make $500,000 that first year in addition to the 180,000? Correct. Okay, so really, you've made close to $1,900,000. And your wealth swing has been like 1.3 in less than three years. What did you guys eat?

I mean, I feel like we eat good food and we do the things that we want to do. I kind of. It's interesting. So by definition, our total net worth is just over a million dollars. I say our real net worth is about 730,000 because that's what we have in money. Some of this net worth is equity in our home. And then this isn't the white coat investor way, I realize, but one of my passions in life is cars. And we don't have an insignificant amount of equity in cars just because I have a couple nice cars that, that we don't really owe much money on. So that factors in part of it. I know most people don't factor in cars in their net worth because it's a depreciating asset, but in our case, it is not insignificant.

What do you mean by a nice car? Are we talking about a Lamborghini or are we talking about a Tesla S?

So I have a truck. My wife has a Blazer. And then the nice car that I'm referring to, I do have a new Corvette Z06, which is about $150,000 car.

Okay, okay. And you're counting the equity in that as well. When did you buy these cars?

I just bought this car last November. And then we've had my wife's Blazer since residency. The truck that I drive now I bought last summer, which was unexpected. It's a weird story. I was out of town, my car broke down. I needed to get back for call and surgeries in the next 12 hours. And so I bought a different truck off the lot and a different city and drove home.

It's fun to have the finances to be able to do that.

It is. It was kind of a crazy scenario that was. Could have been very stressful, but in our current situation, I was able to do that.

You know, there are problems in life that can be solved by money. And when you have money, you can solve those. And sometimes it just means I'm going to buy my car a little sooner than I thought I was going to. I'm going to buy a little faster than I thought I was going to. I'm going to buy it in a different state than I thought it was going to. Exactly. But it's no big deal because it's a problem you can solve with money. Exactly. All right, well, you paid off your student loans. I mean, a big chunk of it was the signing bonus. How come you decided to use your signing bonus for student loans instead of something else instead of buying a Corvette? You didn't buy the Corvette when you got the signing bonus, you put it towards your student loans. Why?

Correct. Yeah. So I knew in residency, I mean, a number one goal of mine was get out of debt. And my wife was on very much on the same page. And I had this rule that I wasn't going to allow myself to buy nice things until we were out of debt. And so my number one goal was to get rid of those student loans. And so I knew the big chunk of change that I was getting from the signing bonus was just going to go straight towards that and help create a huge dent in that.

Now, none of these cars have debt on them, I assume.

So the Corvette has a tiny amount of debt on it because the truck purchase was unexpected. I had saved enough money to buy the Corvette. I knew it was coming down the pipeline. And then when the truck broke down and I was kind of forced to buy a different vehicle around the same time that I was buying the Corvette, it was on its way. I did finance a very small portion.

Of the Corvette, but not much and have since paid it off.

I have about 30,000 of the 150,000. It was $150,000 car. 30,000 of it is not paid off yet.

$30,000 car debt. You've got a mortgage, I presume. How expensive is this house of yours?

Yeah, so we bought our house for $430,000, and we moved here, and we owe 380,000 on it right now.

Okay, as an attending, you bought it. Correct. And what part of the country do you live in?

In the Midwest.

Midwest, okay. So that's a pretty nice house in the Midwest. I was just in Kentucky this last week, and the average house there is 292,000. So in an area like that, 430 is well above average. Yeah. Okay, very cool. So are you from that area, or did you deliberately go to an area that's a little bit lower cost of living? How did that decision happen?

My wife and I are both from the area.

All right, so let's break down your net worth. How much of it is home equity, how much of it is cars, how much is, you know, retirement accounts, other investments, et cetera?

So we have about $670,000 in retirement accounts. And our brokerage account, I currently have about $60,000 in cash, $135,000 in home equity based on what was currently valued at and worked, and then about $170,000 in car equity.

Very cool. What do you invest in?

Right now? We're pretty much 100% in the S&P 500.

Okay. Stock, stock index funds.

Yep.

Well, this is pretty remarkable what you've accomplished. I mean, a huge chunk of your income has gone toward building wealth. You haven't impoverished yourself. You have a pretty darn area you live in. You obviously have bought a pretty expensive toy, but most of your income is clearly going toward building wealth. Why? Why is so much of your income going toward building wealth? Why did you decide to kind of front load your wealth building activities rather than, you know, enjoying a little bit more of the income now to do whatever you want to do?

I guess a couple things it's really important to me to achieve a number that gives me freedom at a younger age later in life. I don't know what that means for me yet. I'm not saying that I want to retire when I'm 48 or when I'm 50, but I know that I want to have options when I'm around that age. If I want to make a career choice, I want to slow down. If I want to keep doing what I'm doing, I just want to have options with my finances at that time. And then the other thing is, I mean, I do have a passion with cars, but outside of that, we just don't spend a lot of money. We don't spend an extravagant amount of money on food. We don't need the big fancy surgeon house. And so there's just a lot of leftover money. And for me, it just makes sense to put that money to use and invest it. And it kind of turns into a net worth fairly quickly when you do that.

Do you guys use a written budget you follow each month or some sort of spending plan?

So our. It's not. We don't really have a spending plan. What we do is we use kind of the pay your future self first. So I have a set amount of dollars that I know I want to save and invest every single month. And then the leftover money is kind of the money we can use to have fun with. Now we don't spend that money as fast as it builds up. So even though we're hitting our monthly goal every month, by the end of the year there's more money than I want in my checking account. So we end up putting more into our retirement and investments above and beyond our goal. But we use the pay yourself first or your future self first and then spend what's left over.

How much do you guys think you spend in a given month?

On average, about $10,000 a month probably.

What did you think about your tax return that first year you became an attendee?

Tax season is no longer a fun part of the year. We're getting ready to make that payment.

Pretty shocking to pay more in taxes than you were making as a resident.

Yes, yes. Tax season is not a fun time of the year.

Yeah. What's the biggest money fight the two of you ever had?

Biggest money fight. So that would have been in residency. We're very much aligned on our goals and we don't like to spend on the day to day too much. But I also am very crazy about having a emergency fund or a stash of money if something were to ever happen. And in residency there was around the holidays, I thought my wife maybe spent a little bit more than we should have and my emergency or our checking account dipped below what I want our emergency fund to be and turned into a little bit of an argument. But really beyond that, we're pretty well aligned on things.

What did you guys take away from that disagreement?

That disagreement? I think when we started making real attending money, my wife was just scared to spend too much money every month. And so she sweats the small stuff now. And I have to tell her, you want a pair of shoes, go buy your pair of shoes. Don't sweat the small stuff as much. But I don't know, kind of reinforce that we don't like to spend on a day to day that much, I guess.

Who do you think's the bigger cheapskate, you or her?

Right now it's probably her.

Has that changed as time went on?

No, I don't think it's changed.

Okay, so there are some people out there, they're listening to this and they're like, man, that sounds awesome. That's where I want to be. What advice do you have for that person? Person? Maybe they're a resident, maybe they're a fellow, maybe they're still in med school, or maybe they're a new attending and they're like, wow, they really just crushed it the first few years. What advice do you have for somebody who wants to do what you've done?

I guess the advice that I have, number one, is surround yourself by resources and people where you can kind of slowly learn this stuff, whether that's listening to one of your podcasts on the way to work or just talk to people with similar goals as you. I don't think you have to become an expert in everything. But if you do these things slowly, you learn enough that you can set yourself up for success. For me, what was very, very helpful was I'm a very much a checklist person. So I mentioned I wouldn't allow myself to buy any fun toy until I was out of debt. So those first seven months, we didn't invest in retirement yet. We paid off all of our loans, we got everything done, and then we focused our attention onto the next thing. For me, that's been very helpful. And then something to remind yourself. I think it's important to allow yourself permission to enjoy the fun things in life, too. I'm currently reading the book Taking Stock, and I know you had that author on your podcast over the Christmas time area, and, you know, he stresses that don't make your financial goals your primary goal in life. Figure out what's important to you in life, your passions and things, and then use your success with finances to allow you to do those things and kind of pursue those goals. You certainly need to save and invest, but use that money, your success, as a tool to do what's important for you. And I think you have to do that along the way, which we've been able to do.

Yeah, it's good advice. All right, speaking of those financial goals, what's the next one you're working on?

The next. I mean, it's funny. Coming out of residency, I had a target age that I wanted to become a millionaire, and we are a little bit ahead of schedule. The next goal that I had for myself was my number of financial independence. That's a long ways down the road. So between now and then, I want to figure out what's important to me, what my goal is in life once I hit my number, that I can start to pursue those other things. And I don't know what that is yet, but I think if we stay on this trajectory of what we save every month, I think we're gonna hit that number at a good age and then figure out what we want to.

Do with our life after that. Very cool. Well, congratulations on your success, Chris. It's awesome. It's amazing when you put everything together. You go to a place with a very reasonable cost of living, you make good money, you prioritize building wealth early on in your career, and bam, less than three years out, you're a millionaire. You don't have any student loans, got a little piddly car loan that I suspect you may be wiping out soon, and you're well on your way. You say your FI number is way out there in the distance. I'm not sure that's true. It wouldn't surprise me if you hit that far sooner than you think you're going to, given your habits. So congratulations to you and your wife, and thank you for coming on the Milestones podcast. Inspire others to do the same.

Yeah, thank you so much for having me. And thank you so much for everything that you do. You've certainly played a big part in our success.

It's our pleasure. All right. I thought that was a great interview with somebody that's just doing very great. I mean, you know, it's funny. Life comes up sometimes. You do things that others might say it's a financial mistake, take out a $30,000 car loan. But compared to everything being done right, it just doesn't matter in this case. Right. I mean, when you're building wealth at 3 or 4 or $500,000 a year, it doesn't matter if you have a $30,000 car loan. Let's be honest. So I'm going to rant for a little bit here about cars, but I'll tell you what, if you can become a millionaire in three years, much of this discussion may not apply all that much to you. Let's be honest with you. But let's do it anyway. So let's talk about cars for a minute, because I truly believe that the reason most middle class families in this country do not become millionaires is sitting in their driveway. Americans like to drive expensive cars. It's fun. Expensive cars are nice. I get it. I've got an expensive platinum F250. People wonder why a blogger needs it. A blogger doesn't need it. I think we talked about that on a separate podcast. I don't know if it runs before or after this one, but you can see that for details. But the bottom line is we like having nice stuff. But sometimes, if you let it, that nice stuff keeps you from reaching your financial goals. The difference between the annual expense, counting depreciation, insurance and maintenance and all that stuff, between a really nice car, especially if you're buying them new and churning them every three years or so, and a not so nice car, an economy car that you hold onto for 10 or 15 or 20 years can be about $5,000 per year. That's the difference in operating costs. And a lot of families have more than one of those. Well, $5,000 per year invested at 8% over 40 years is $1.3 million. Thus, if most families would drive, you know, maybe not a beater, but an economy car that you hold onto for a long time, they would be millionaires. Instead, they spend too much on a car. So here's some guidelines to help you not have this problem. Now I gotta put a caveat on this though. You know, most doctors make enough money that they can afford to kind of throw some money away on cars and still be okay, still reach their financial goals. People like to say that, oh, white coat investor says you gotta drive a 20 year old Honda Civic to be successful. Well, obviously that's not true. If you make two or three or $400,000 per year, you've got a halfway decent savings rate, you control your spending, you don't have debt coming out your ears. You can probably spend a little bit more on a car and still be okay. But here's some guidelines for cars because people need these. People spend way too much on cars if you don't pay any attention to it. All right, so some of these guidelines I stole from Dave Ramsey. I don't agree with everything Dave Ramsey says, but I think his guidelines on vehicles are pretty good. So we're going to use some of those. And then I've got a few of my own. Okay, so the first one is that you shouldn't spend more than 50% of your gross income on all the things you own. With motors. We're talking about cars, we're talking about motorcycles, we're talking about dirt bikes, we're talking about boats, we're talking about planes. 50% of gross income. So if you're a resident making $60,000 a year and you have a $45,000 car, you have broken this rule. If you are a physician family and you make $250,000 a year and you've got brand new F250 that cost you 90 grand, and you've got a $60,000 Suburban, you've broken this rule. On the other hand, if you're making $400,000 a year and you've got a 15 year old Honda Civic, and you've got three year old Toyota Sequoia, you're well within this rule. So just do the math. 50% of gross income for all things. With motors now, at certain levels of wealth, the income doesn't matter as much. Obviously, if you're a financially independent multimillionaire, this guidelines maybe not for you, but for those of us still trying to build wealth, this is a pretty good rule of thumb. 50% of gross income is the max. You spend less, you can use more of it to make build wealth. But you certainly shouldn't feel guilty if you've got $80,000 worth of cars and you make $250,000 a year. All right, here's another one. Don't buy your cars new until you're a millionaire. I think this is a pretty good rule of thumb. You've got a better use for your money if you're not a millionaire yet than a brand new car. Yes, the brand new car is cool. You got a warranty on it. You get a few more years with minimal maintenance hassles, minimal repair hassles. Anyway, I guess you have the same maintenance. Either way, you don't have to buy anybody else's problems. You can order it exactly like you like it. I bought new cars. I understand the draw. I just think it's probably wise to build wealth first so you can get a nice used car. You can buy something that's two or three years old that's already had a big chunk of the depreciation taken off it. You can drive it for 10 or 15 years and that's fine, right? But I'd encourage you not to really start buying new until you become a millionaire. Now, for most docs, that's probably five to 10 years out of training. It's probably about the time most docs taking care of their finances can become a millionaire. So it's not forever, right? Certainly by the time you're 40, you ought to be able to be buying all your cars new. So don't feel like you're having to live some deprived life for 50 or 60 or 70% of your life. You're going to be able to drive brand new cars as you're not totally deprived. But I'd encourage you to become a millionaire first. All right, here's another guideline. You should never have a five figure car loan. All right? If you need a car loan, this is a consumer good. This is consumer debt. It depreciates. It's going down in value. I understand that some people need a car, but if you need a car, what you need is a $5,000 car. Maybe you can stretch it up to $10,000. So if the need is five or $10,000, you should never have a car loan for more than what you need, right? And so no one should ever really have a five figure car loan. If you have a car loan, it should be a few thousand dollars and you should be paying it off very, very rapidly. This isn't something you keep around for years and years and years. Now, I know it seems normal they have a car loan that people talk about. What they pay rather than what it costs. This is like Finance101. Actually, Finance101 is, don't carry a balance on your credit cards. If you haven't learned that, that's personal finance 101. Don't carry a balance on your credit card. But personal finance 201 is you don't buy cars on credit, right? You need to pay more attention to what the cost of the thing is than what the cost per month is, because they can make the cost per month anything they want just by stretching out the number of months that you pay for it. The average car loan right now is $36,000 on used cars. That's the average car loan on a used car. $36,000 stretched over 68 months. That's the average. Half of them are more or longer than that. That's ridiculous. There's no reason you need a car loan that long, all right? Five figure car loan is the max, and you should never have a second car loan, right? This is something you only do one time in your life, right? You don't have any money. You're a resident, your car's dead. You need a new car. Great. Go borrow $8,000 and buy yourself an $8,000 car. As soon as you pay it off, you keep making those payments, but you make them to yourself. And in essence, you're using those payments to save up for your next car. And when you've hit $20,000 or $30,000 or $40,000 or whatever it is that you want to spend on your next car, you take that money, you go buy the new car, you sell the old car, and you start the process again, right? So one car loan in your life, zero to one. I'd rather have you have zero car loans, but one in your life? It's five figures or less. Here's the other thing to keep in mind about cars. Safety, right? You care about your family, you care about yourself. You don't want to be disabled, right? You have this great earning ability, all right? Don't forget, safety can be used to justify anything, right? You can justify bulletproof windows with safety, right? You can justify a dramatically more expensive car than you need with safety. Every year there's new safety features on cars. My new F250, it practically drives itself. You just got to jiggle the steering wheel every now and then, and it'll track the distance between you and the car in front of you. It'll slam on the brakes if it needs to. It'll keep you in your lane. It's Got all kinds of cool safety features that cars have on them these days. You know, it's got cameras all the way around it so I can see if I'm running over anybody or anything. It's really pretty remarkable. But there'll be something new next year that'll be even nicer. And if you're just going to go for maximum safety all the time, you're going to spend an awful lot of money on cars. So yes, you're going to get a significant upgrade in your safety going from a 20 year old car to a 5 year old car, no doubt about it. And if you can afford that, go ahead and do it. But keep in mind that five years ago, the ultra safe car is now a five year old car. It's okay to drive a car that's five or 10 years old. You are not. It does not show that you don't care about your family. Right. It's still got lots of cool safety features on it, even if it doesn't have every single one of them. So be careful what you justify with the safety justification. All right, enough ranting about cars. I estimate that 80% of doctors need, want and should use a financial advisor and or an investment manager. Some investment gurus, such as Dr. William Bernstein, think my estimate is way too low. At any rate, if you want to use an advisor temporarily or for your entire life, there's no reason to feel guilty about it. Just make sure you are getting good advice at a fair price. If you need help updating your financial plan or just getting one in place, check out our list of recommended financial advisors@whitecoatinvestor.com financial advisors. You can do this and the White Coat Investor can help. Thanks so much for listening to this podcast. If you'd like to be on it, you can apply whitecoatinvestor.commilestones until our next one next week. Keep your head up, shoulders back. You've got this. The White Coat Investor community is here to help you do so. See you next time. The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.